Drop in Factory Orders Fuels Talk of Recession in Germany

Published: July 5, 2003

BERLIN, July 4—
German manufacturing orders fell for the third time in four months in May, government figures showed today, indicating that the nation's economy may contract again in the second quarter.

Germany's $2.3 trillion economy, Europe's largest, shrank 0.2 percent in the first quarter. The euro's 17 percent increase against the dollar over the last year has made German goods more expensive overseas, damaging the country's export market. Export orders dropped 4.8 percent, while demand from customers in Germany rose 0.2 percent. Exports, which account for about a third of gross domestic product, kept the economy growing last year.

Orders to factories, whose production accounts for about a fifth of the economy, fell 2.2 percent from those in April, the economy and labor ministry said in Berlin. Economists had expected orders to be unchanged.

''We are in a situation that is very similar to a recession,'' said Werner Marnette, the chief executive of the Norddeutsche Affinerie, Europe's largest copper producer. ''I haven't talked to any colleague who sees a real turning point coming up.''

Orders for consumer goods like toasters and televisions rose 1 percent. But orders for goods like factory machinery and office equipment fell 2.8 percent from April, led by a 6.9 percent drop in demand from abroad, the ministry said.

''The significant decline in foreign orders probably reflects the weakness of the world economy and the appreciation of the euro,'' the ministry said in a statement. From a year ago, orders fell 5.9 percent, figures from the Bundesbank showed.

The economy of the euro nations stagnated in the first six months, the European Union said on Wednesday, and there are ''significant risks'' to a return to growth in the second half.